Q1 2025 Linamar Corp Earnings Call
Speaker Change: Good afternoon, ladies and gentlemen and welcome to the Linamar 21 2025 Erning School conference call. At this time, all lines are in this and only mode.
Speaker Change: Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator.
Speaker Change: This call has been recorded on Wednesday, May 7, 2025. I would not like to turn the conference over to Linda Hasenfratz executive chair. Please go ahead.
Speaker Change: Thanks so much. Good afternoon everyone and welcome to our first quarter conference call. Before we begin, I'll try your attention to the disclaimer currently being broadcast.
Speaker Change: Joining me to catch my name is Usual, our name is Jarrell, our president and CEO , and Dale Schneider, our CFO , both of whom will be addressing the call formally.
Speaker Change: Also available for questions are Mark Stoddart and Kevin Houthand and other members of our Corporate IR Marketing Finance and Legal Team.
Okay, I'll start off with some highlights of the quarter.
Speaker Change: I think a good place to start is Equal Commander is the key value drivers that makes Linda remarks such a great attachment and how they played out this order.
Speaker Change: First, Linamar has a long track record that consists of sustainable results driving
Speaker Change: Q1 was certainly another good example, with earnings and margin growth both delivered in a time when most companies are not achieving that. The second key point is our flexibility to mitigate risk, never more important than in an uncertain time.
such as for experiencing.
Speaker Change: Our equipment is for a planable, flexible equipment. It can be used on a large variety of types of products. We're able to take the equipment out of existing lines.
Speaker Change: and again, especially important in this time frame of market volume is being down, and we allocate them into launching business to help keep our catback spending lower without impacting our ability to grow, and you saw that again this quarter with catback spending below normal levels.
Speaker Change: that we would normally have. We can also use that flexible equipment to our advantage as a moment to help us when take over business.
Speaker Change: Third, we've always run a freezon conservative balance sheet. We target keeping net depth to Ubisoft under 1.5 times. Q1, again, find net depth to Ubisoft right around that 1.04 mark and excellent levels to be at given great opportunities in the market today.
Speaker Change: Lastly, we're training staff to share orders with the key value creation driver of Linamar as well. You saw that also play out this quarter. Both of us continues with purchase of shares as well as an increase announced to our dividends.
Speaker Change: Okay, turning highlights to the quarter, I would identify these as our most relevant accomplishment. First, we saw normalized earnings growth overall and in both segments to fight down markets in both segments.
Speaker Change: that earning growth is thriving at an excellent cost reduction and improves operational efficiency driven by our global teams.
Speaker Change: and it's back to our normalized operating earnings margin two, our target level of 10% in order.
Speaker Change: that Ernie Crowe also drives out of market share growth in both segments, which is critical in times of market decline to provide some off-guet.
Speaker Change: to those traditional volumes of planning. Finally, we saw a continued positive free cash flow, unusual in the first quarter of the year, which is helping to keep that balance sheet strong, let's put it in eyes, and give you a well-position for action in an opportunity to stick landscape.
Speaker Change: Turning to seven of the numbers, we saw a sales gift, $2.5 billion, that's down seven percent of a last year in markets that were down significantly more as Jim is going to outline for you in a moment.
Jim Jarrell: Silver Down more modestly in the mobility segment as 5% down was launching business really helping to offset very soft market. North America was down 6% and New York's down 7% both important markets for it in our mobility segment.
Jim Jarrell: Normalize neck earnings on the other hand were up 5% on strong operational performance, reaching 157.2 million or 6.6 percent of sales.
Jim Jarrell: Normalized DPS was $2.70% up 6.6% over 2.1 last year. It's great to see this earnings growth and market improvement in a challenging environment.
Jim Jarrell: I would summarize our results this quarter at the most impacted by first those operational improvements and cost reductions in both segments already mentioned.
Lawson Business, and I'm a security segment.
Some effects tailwind. Morrison needs that real fine.
Jim Jarrell: steady sales and earnings are maxed on in a test market, offset by those steep declines in the mobility market volumes as noted in New York and North America and steep declines in the access market volumes as well.
Jim Jarrell: Tesla was positive at $76.4 million. We continue to actively reallocate capital from programs with less volume or softer launches and funding our capital lila's results.
Jim Jarrell: We expect to continue to generate significant pre-task flow in 2025 for another strong repositive
Jim Jarrell: Finally, I'll have a look at an update on the terror side. Despite the myriad of terror is put in place over the last couple of months, Linda Martin continues to have minimal bottom
Jim Jarrell: We have some interaction in a few areas, but not at a material level as you can see here with each child, but each tries a carrot that's active at the moment.
Jim Jarrell: In general, our products are U.S.M.P.A. defined for virtually everything we ship into the U.S., meaning no interest for us on our industrial products, whether it's in order of records, or for our customers on the mobility side where they are in order of records.
Jim Jarrell: I feel worried you, however, about the growing impact of Paris on our auto-maintenance customers.
Jim Jarrell: However, as they continue to build up, whether they be metal care, or vehicle care, or part care for the offshore purchases, it is all starting to build up. The cost to our customers are in the billions and I do worry if I concern to impact the vehicle pricing and therefore demand.
Jim Jarrell: Now, on the positive side, we are seeing customers looking at on-shore parts and systems that they are currently buying offshore from Asia or from Europe . We're building up a significant list of new business opportunities that are in the position process for our North American plants.
Jim Jarrell: The U.S. is still respecting the U.S. MTA agreement, meaning these parts can be supplied from the U.S., from Canada, or Mexico, here free at the moment, as long as it's the U.S. MTA compliance.
Jim Jarrell: where the job goes will depend on where we have capacity, experience, and teams with able to take on the work of low court, as spectrum of profit.
Jim Jarrell: We believe that our government in North America will prioritize a USMCA 2.0 renegotiations, a semantic place.
Jim Jarrell: I think that is Fortress North America in terms of territory trade with some of them in support and I believe that will be positive for our business in North America.
Speaker Change: With that, I'm going to turn it over to our CEO , Jim Jarrell, to review industry and operate some that things in a little more detail. Thanks, Linda. Good afternoon, everyone. As I said, last quarter.
Jim Jarrell: and what you see on the screen remains a key theme that is keeping our team here at Linamar Grounded in 25 despite a lot of noise in the external market. So no matter what is happening outside our walls, we must find ways to grow the revenue, grow profit and grow our team.
Jim Jarrell: We've been using these three filters for everything that comes across our depths.
Jim Jarrell: and if an issue does not meet one of these at least, we ask ourselves why do we do it?
Jim Jarrell: and just before I begin my segments in market by market commentary, I wanted to highlight a few keys to how we approach
in the past quarter.
Jim Jarrell: As Linda Highlighted, Q1 sales were down due to tough markets, yet Linamar's normalized net earnings per share was up 6.6 margins, while at the consolidated level improved nearly 75 basis points.
Jim Jarrell: We achieved this in what was otherwise a tough quarter due to a few things. One, the Stepping School of Success Velocity, the Linamar Stepping School is our performance management system, found scorecards and assessed the KPI that drives leadership.
Jim Jarrell: Three, launch performance is an issue that can make or break a new program during a ramp-up. I would say that Linamar has an industry-leading launch system and launch track record even so.
Jim Jarrell: Earlier this year, we deep dive lessons learned on a number of launches and continue to hone our global process. The early results from our update are yielding incremental improvement.
Jim Jarrell: Every manufacturing company has issues, period. It's how you ensure you can navigate and stay on time on budget with excellent quality. And that's another point, fanatical discipline, world class quality and delivery to our customers.
Jim Jarrell: And number five, lastly, our flexible CNC manufacturing strategy enables us to pivot when market volumes don't live up to the planned program expectations.
Jim Jarrell: Lumpy EV, Market Adoptions, had a refocus of multi-energy solutions by our customers, capacities and are aligned to new, required demand levels. Again, flexibility is a Linamar advantage.
Speaker Change: Linda already mentioned the dynamics around trade and tariff. We are dealing with Alpholdo
Speaker Change: until the Q&A after Dale has walked through our in-depth results.
Speaker Change: But what I will say is that Linamar team is hard at work to mitigate any increased costs wherever we can, and that we are finding ways to deploy our entrepreneurial culture to create opportunities with the realignment of the supply chains.
Speaker Change: Now moving on to look at the access or AWP market.
Speaker Change: Globally, the overall industry was down 34% in the first quarter of 25 compared to last year.
Speaker Change: Marketing clients were felt in both North America and Asia Pacific with European clouds.
Speaker Change: The US non-residential construction is roughly 4% through the first two months of the year. The Dodd momentum index is also up. So there are positive trends to the underlying demand, but AWP's volumes have been challenged.
Speaker Change: Recent industry consolidation in the rental company sector, tariffs and overall economic headwinds are hampering current AWP demand. We're speaking with our customers to see how much of that demand was just a slower start to the year and was just simply pushed out to a future quarter.
Speaker Change: Q2 and Q3 are typically the strong seasonal quarters in the business. Our backlog and booking rates that trended up in the past few weeks, and so we're seeing more positive signals from our customers.
Speaker Change: Bottom line again for Q1, we think it's great to see Skyjack outperform the market and fare better than the overall industry.
Speaker Change: In AWP, from a new product introduction standpoint, there's an exciting news to share here in both scissors and in boom.
Speaker Change: First, our 19-foot micro-cigarette law last year has received an international war toward power access due in part to a new e-dried system that pours over all the efficiency.
Speaker Change: Next, our boom line will soon add a hybrid-powered option. The rental market is calling for a more quiet, clean and sustainable access equipment. Our new hybrid grooms deliver with the facility of conventional ice.
Speaker Change: Power, but now made it to a zero emissions battery electric mode. The new hybrid booms join our recently launched fully electric boom line-up offering rental poses and contractors more options to suit the specific needs of any given job site.
Speaker Change: As always, that Sky Deck will remain committed to delivering world-class product folks around user safety through new and innovative products that provide our customers the best total possible ownership and certainly a compelling ROI.
Speaker Change: Next we'll turn to the agriculture industry volume as we mentioned on our last earnings call.
Speaker Change: Our core North American large ag market was in a multi-year down cycle. We noted that commodity prices needed to stabilize and inventory flow through our required ahead of the next industry up cycle.
Speaker Change: and that's how 2025 is playing out today. In our primary North American market, industry volumes are down again in double digits for a second year. Through the first three months of 2025, combine retail work in fact down 46 percent.
High Force Power Tractors, with down 19%.
Speaker Change: Again, by driving market share growth, Linamar's three-core agriculture equipment brands, Macdon, Salford and Borgo were able to outpace the market.
Speaker Change: Unit Sales for the first three months of the year are down only 8% in the aggregate against a weak industry backdrop, some fantastic results by our Linamar Agricultural Group.
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Speaker Change: As we enter 2025, there was a broad expectation that it was going to be the trough in a typical ag market multi-year downcycle, but we'll be watching carefully as Barn M. Summary means low, and new equipment demand is impacted by a weight and sea approach by farmers.
Speaker Change: Many mainline OEMs are focused on moving inventory through the distribution channels this year and there's some indication that there could be government support coming via incentives for U.S. farmers.
Speaker Change: Moving on to the mobility segment, the first quarter saw industry vehicle production volumes followed by 5.6 in North America, 6.7 in Europe with Asia specifically actually gaining over to 7 percent.
Speaker Change: Industry experts have built in the negative impacts from terrorists into their annual forecast for both 25 and 26. We're hopeful those forecasts will now improve slightly.
Speaker Change: Following the Transitionary Period Guidelines data by the US Administration just late last week.
Speaker Change: Percent in North America, a further 3.1 drop in Europe with Asia is mostly flat.
Speaker Change: Looking specifically at Q1 for Linamar Mobility, we improve content for vehicles in North America to 300 in Asia to $11.75. Europe , however, saw a reduction mainly due to lower production volumes really around EV platforms that the company has contested on.
Speaker Change: All told global CPV for the first quarter was 8425, down slightly from the same quarter last year, although right in line where we tracked through over all 2024.
Speaker Change: I recently attended the GM Ceremony to accept this award that marked the ninth, yes it's underlined great in my page, the ninth year in a row that Linamar has won this honor.
Speaker Change: The Linamar team strives to achieve deep customer connections and we truly value the relationship that we built over time based on a reputation of partnership and executing on those commitments.
Speaker Change: It's that industry reputation that opens the door to new opportunities.
Speaker Change: during challenging time. I'll highlight a few of the most recent successes in terms of safe over work we've added as a new business win.
Speaker Change: On our last call and mention, we had a book nearly 180 million of new work in the form of tape over contracts from struggling or distress suppliers. That number has continued to grow with now close to 200 million in annualized sales that we were adding to our launch book.
Speaker Change: Here you can see a few examples of new programs. We've picked up in the last six, eight months including traditional engine, transmission mobility work, but also propulsion, agnostic, structural and chatty content as well.
Speaker Change: Linamar's flexible manufacturing strategy, balance sheet strength, and capacity and best make us a trusted partner for OEMs when they're experiencing underperformance and see their risk within their current supply base. The Linamar team has built reputation for executing HIGGLE-LINAR, the Linamar team has built reputation for executing HIGGLE-LINAR.
Speaker Change: Operations, offering a timely and welcome solution for the OEM. And with that I'm going to turn it over to our COO Dale for a more in-depth financial review.
Thank you, Jim, and good afternoon, everyone.
Speaker Change: Linda has already covered at a high level the solid and realized financial performance in the corner called this jump ready to the business segment review starting with industrial.
Speaker Change: Industrial sales decreased by 13.1% or $95.2 million to $633.4 million in Q1.
Speaker Change: 50 Climes primarily due to the lower access equipment and agricultural sales, despite the noble market share growth in certain products. However, the negative impact was partially offset by increased sales from our acquisition of Borough, as well as the favorable changes
Speaker Change: This growth is primarily driven by agricultural improvements resulting from cost reductions in operational efficiency, favorable changes in foreign exchange rates, and improved earnings related to the acquisition of poor bills.
Speaker Change: with these positive factors are partially offset by reduced access volumes due to the lower demand.
Speaker Change: This design was primarily due to the safety of downturns of the European and North America markets and reduced production for certain programs that are ending and lower volumes on little EV programs where the company has significant business.
Speaker Change: Q1 normalized operating earnings for mobility were up 1.5% over last year to $125.4 million. This improvement was driven by cost reductions, operational efficiencies, reduced launch costs, and customer cost
Speaker Change: The discipline in there was a modest favorable effects impact from the changes and rates.
Speaker Change: However, these positive factors are partially upset by the contribution impact due to the significant downturn in the automobile markets, the lower production on certain ending programs and reduce volumes on certain mature programs where we have significant business.
Speaker Change: Starting with our overall cast position, we came in at 909.2 million on March 31st at the 145.4 million, compared to December [inaudible] at the 145.4 million on March 31st at the 145.4 million on March 31st
Speaker Change: The first quarter generated 164.3 million cash from operating activities being used primarily to fund Q1 cat-backs in debt repayments.
Speaker Change: during the leverage in that debt to EBITDA was 1.04 times the quartered down from the high 1.24 times after the acquisition of 4.0 and Q1 2024. If you normalize EBITDA further reduces from the leverage of 1.0 times the
Speaker Change: to 0.81 due to the goodwill requirements of Q4 last year.
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Speaker Change: and Q1. We have purchased 1 million shares and program to date we're nearly at 1.8 million shares which equates to nearly a hundred million dollars being spent on the program.
Speaker Change: This is a line with a capital allocation strategy to optimize a balance sheet, especially in these turbulent times, focusing on the growth of the business and returning cash, exit cash to the shareholders.
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Speaker Change: I'll start off with the current outlook does not yet factor in any direct impacts of the U.S. terrorist.
Speaker Change: has already discussed the terror, so I'll move on to the health work.
Speaker Change: Looking towards the next quarter, the mobility setting up will see sales remain flat and double digits growth in OE compared to Q2 2024.
Speaker Change: The OE will continue to improve on cost reduction operational improvements and from added contribution on our launching programs.
Speaker Change: The industrial segment will see double digit sales and OE declines when compared to Q2, 2024. Sales are declining on down markets expected in full of ag and access equipment.
Speaker Change: OE is down because of the decremental impact on the changes in sales in addition to a product mixed which is currently expected to be unfavorable.
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Speaker Change: As a result, they expect the expectation on the consultant's results for Q2 is to have a decline in sale in a modest decline in EPS.
Speaker Change: Even with the reductions in the markets, free cash flow generation will be being strong in the second quarter.
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Speaker Change: to the full year 2025 for mobility, industry forecasts, those are predicting continuing market softness in 20.5.
Speaker Change: Notwithstanding the market softness, our sales will grow over 2014 levels until we will grow and accelerate a double digit rate. We still see launching programs maintaining our...
previous outblocks.
Speaker Change: and adding in between 500 to 700 million sales that will help mitigate the market compliance. As a result, we are still expecting to see margins expansion, which will push mobility back into its normal range of 7 to 10 percent.
Speaker Change: Industrial will see double digit market declines in egg and single digit declines in access, which will result in an overall net decline in sales.
Speaker Change: The sales declined and the expected product mix of the sales will result in double-digit decline in the week for 2024. Despite the OE levels, margins will still be in an all-around age of 14 to 18%.
Thank you for joining us for the second.
Speaker Change: Overall, for 2025 sales will be flat. EPS will grow. Free cash flow will remain strong, which will ensure our balance sheet is also strong.
Speaker Change: In 2026, the responsibility segment is expected to continue its sales growth and to achieve double
Speaker Change: The automotive markets are projected to grow by 1.1% over 2025, with the aid in mobility and expansion.
Speaker Change: Additionally, new launches are anticipated to contribute an additional 500 to 700 million sales. The OE will outpace the sales growth due to the increased volumes, the ongoing improvements in operation, efficiency and cost reduction.
Speaker Change: As a result, the O.E. margins are expected to expand further into our normal range of 70-10% of sales.
Speaker Change: industrial segment is also forecasted to experience growth in both sales and versions.
Speaker Change: The asset's market is expected to grow by 2.3% over 2025, drive and sales growth of SkyJet. Furthermore, the agricultural markets are anticipated to start to rebound in 2026, contributing to sales growth in the Ed businesses.
Speaker Change: Constantly, Constantly, the OE is expected to grow twenty-twenty percent due to the volume increases in both access and aid.
Speaker Change: From a consolidated perspective, the segments will drive overall sales growth in 2026 and will solve a double digit earnings for shared growth, thereby expanding that margins.
Speaker Change: The balance sheet is expected to be strong, solid leverage, and strong free cash flow generation.
Speaker Change: Thank you. I'd like to open up for questions.
Speaker Change: Thank you for watching. I'm Jim Jarrell. I'll see you next time.
Thank you for watching!
Speaker Change: Thank you, ladies and gentlemen, we will not begin the question and answer session.
Speaker Change: Should you have a question, please press star, followed by the number one on your telephone You will hear a prompt that your hand has been reached
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Speaker Change: And if you are using a speaker phone, please leave the handset before pressing any key.
One moment please for our first question.
Thank you for watching!
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Speaker Change: Your first question comes from Tamy Chen from BMO Capital Market.
Please go ahead.
Sammy Chan: Good afternoon. Thanks for the question. I wanted to start with the the terror topic here.
Speaker Change: I know it's still been pretty recent with the recent clarifications from the US administration on the tariffs, but I'm just wondering at this point, are customers starting to respond and make some decisions, and I think you mentioned that they are starting to think about ensuring parts, if you could talk a little bit more about that, and going forward, what sort of action.
Speaker Change: We say that for the rest of this year, if we assume that tariffs stay as is, do you think our most likely that ear customers will think about doing?
Speaker Change: Yeah, I think that the great news is that the US did...
Speaker Change: Still respecting the US-MCA agreement, which means that the product that we're shipping into the US from Canada and Mexico, as long as the US-MCA compliant, which it is, continues to travel in care of free.
Speaker Change: which is great news, right? I mean to me it's really important that we respect that sort of fortress North America and continue to work within this highly integrated supply chain.
Speaker Change: So what happened last week was that that was clarified for one thing. And secondly, the auto price test of 25% were imposed on products that are being bought offshore. So outside it's not America.
Speaker Change: and a system put in place whereby rebates words are available to help offset the cost of those this year and next year giving the automakers time to ensure some of those parts.
Speaker Change: So, to me, that is going to be the clear priority is to look at what is being bought off-shore, whether it be from Asia or from Europe for instance.
Speaker Change: and how do they bring that back into North America? And I would say we're definitely seeing action and questions in that regard from our customers, which we see have a huge opportunity.
Speaker Change: for our facilities. I mean, our U.S. facilities, but also our Canadian and Mexico facilities news, again, as we continue to respect the U.S.M.CA agreement.
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Speaker Change: Yeah, I think just to maybe add a little bit to that as well, the customers are not asking us to...
Speaker Change: started because of the tariffs that are imposed in Europe and Asia particularly.
Speaker Change: and that to me seems like to be really one of the bigger concerns because of the tariffs and the actual ability to get.
www.schneider-dot-com
Speaker Change: Okay, got it. And I wanted to confirm, so there's two reps.
Speaker Change: a headwind on you from the current care of regime where, you know, you're the importer record. I think you said earlier for both of your segments is
Speaker Change: It's very minimal, so I assume that's not really material. Can you confirm that? And if there is some sizeable amount, do you expect to be able to get recovery on this from your customers?
Yeah, you're correct. It is.
Not a material amount, it's not zero.
Speaker Change: but it is not a material level. So, like things like metal tariffs for instance.
Speaker Change: on the mobility side. We have normal metal market patches to customers. That's just...
Speaker Change: Normal Court Operations, so there would be no impact on the mobility side for metals. On the industrial side we import very little steel and aluminum for our operation. On the supply side the majority of steel and aluminum going into supplier products are purchased.
Speaker Change: in the U.S. that are coming from U.S. suppliers, so not a lot of impact there either. So, you know, there's a little bit of impact here and there, maybe for some auto parts, you know, maybe cats and torches and cymbal parts that we might be shipping into the U.S. coming from offshore, but again, it's not a material level. So, it's not zero, but it is not a significant impact to it.
Speaker Change: You asked a question about recoveries, too. Of course, you know, things a lot of customers direct right sources so in those situations obviously we do get the ability to recover that and then the other side, you know, we're working with suppliers.
Speaker Change: in regards to how you do that and then transfer prices, right, if you need to work those. So, I think we've got a really good mitigation strategy. We meet weekly on this as a topic Elliott who's here, our general counsel is sort of leading that and that just cascades through the whole organization. So, we know to mitigate, go after customers, talk to suppliers and really get it, have a good handle on this. Thank you.
Thank you for watching!
Okay.
and my last question is and I'm
Speaker Change: So, in this backdrop, so this sounds like from a capital allocation, share buyback perspective. You still got capacity on your current NCIB, so should investors interpret that as you will continue to remain active, I ask because we have seen other of your peers pause their buybacks given this current uncertain situation. Thanks.
Speaker Change: Yeah, I mean, we've been very active on the buyback since we initiated it in November , and I mean, we think it is a good use of capital, especially when you're depressed.
Speaker Change: Share prices that we've experienced in the last few months, thanks to all the pressure from these tariff unknowns. But I will say that as we outline in our capital allocation strategy, that we outline last year.
Speaker Change: Our top priority is always innovation and growth. And we are seeing a lot of growth opportunities out there right now. So, you know, although we are not putting the buy-back on goal, we definitely are going to balance it with these growth opportunities. So, you know, there...
Speaker Change: That's something that we will look to actively be doing in the back half of the year.
Great. Thank you.
Thank you for watching!
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Speaker Change: Thank you so much for that question. And our next question comes from Brian Morrison from
Sis, go ahead.
Brian Morrison: Yeah, thanks very much. First, I do want to commend you on your Canadian commitment.
the solid quarter and remaining an activist here in CIB.
Speaker Change: and I want to follow along what Tamy asked on the tariffs here. So it sounds like the impact is limited, it will flow through to the OEM. What do you mean by no tariffs are factored in the guidance? Is this referring to production volumes and what light vehicle production volumes are factored in from North America?
Speaker Change: Thank you for watching. I'm Jim Jarrell. I'll see you next time.
Speaker Change: I mean, in terms of what's factored in, as noted, we have minimal impact, so there's not much to factor in. So when we say not factoring in, that would be other things that we don't know that might be coming down the pipe. So as you know, things change.
Speaker Change: and pretty regularly in this area. So, you know, we're conscious of the fact that if something changes, it's obviously not going to be reflective. Yeah, but also say, Brian , some examples like there is exposure, but if we believe we're working with our customer to get the coverage.
Speaker Change: I mean, that's what we're assuming in our forecasts right now, so we know that going into this right, and so there's those, as Linda said, these things are changing day by day, and so we sort of understand where we are right now today.
Yeah, no, I understand that. I just wondered what is-
Speaker Change: The volume of light vehicle production, you have factored it for North America and your guide. Yeah, the North American is factoring in based on IHS is the exposure on the tariff, that's what we have as the latest in the IHS.
Speaker Change: Brian , we do utilize IHS or S&T mobility for our core test.
Brian Morrison: they have been pretty on top of their forecast in terms of adjusting to the tariff regimes as they come to. I think now that they have kind of their baseline set.
Jim Jarrell: and that forecast was published at really late April 15th. So that's really what we are watching through with our latest estimates that Dale could show.
Jim Jarrell: So the announcements made subsequently last week, as we led up to the major deadline, made a softened a little bit in terms of their purchase.
Speaker Change: I think Linda mentioned it and we mentioned it. I think the biggest fear for all of us is the volumes, you know, what happens with all the additional tariffs.
Right.
Brian Morrison: I want to turn to Dale. I want to go through the industrial margin of 20%. So, industrial sales in the quarter are down a hundred million. Develop often said your decrements are about 30% yet
Brian Morrison: Walk me through the impact of those three buckets we mentioned, cost efficiencies, FX and burgo. And what is this FX exposures at transactional USD on Canadian costs? Like, what is that?
Brian Morrison: Yes, the effects we're referring to is the impact on sales and purchases from buying or selling foreign firms. So it's inherent in our income statement about it as we do our transactions.
Brian Morrison: So, it's not, it's not the game, it was on the balance sheet that we normally normalize it.
Brian Morrison: Yeah, no, I understand that, but I'm asking what it is and what is the impact on your margin in the quarter.
for each of the three partners.
Speaker Change: Brian , we don't provide that level in detail in terms of-
Brian Morrison: You know, what the impact of each thing is, but I'll say a few things. One…
Brian Morrison: because our agricultural businesses, some even more so than others, can't get run out along the higher margins than others. So, you know, if you've got stronger performance in...
Speaker Change: You know, one of those businesses that is going to skew the margin. So next was definitely a big part of it.
Speaker Change: So, that was certainly a big factor as well. Forgo, it was just one last month, last year, if you recall, we started, we applied for go as a February 1st, so it's really just one month for the additional earnings from
Speaker Change: I don't want to respect your competitive disclosure here, but when you have such a big movement with respect to the contribution, perhaps you could rank, you know, what drove that? Is it the cost efficiencies? Is it FX or is it the mix?
Speaker Change: I would say mix would be our biggest driver of that. Yes. Mixed vanishing seeds and then something from a lot of things on that. Yes.
Michael Glenn: Thank you so much for that question as well and third one we have here is Michael Glen from
Please go ahead.
Michael Glenn: Hey, thanks for taking the question. So just to start circling back to the Q4 report, there were some indications that you were working to move some product across the border in anticipation of tariffs and I'm just trying to get a sense how much of Q1 was influenced by cross-border movement or customers in either segments.
Michael Glenn: buying ahead of any, like just trying to potentially avoid tariffs, just trying to get a sense of that.
Speaker Change: We did, I think, the customers in the mobility side pulled in Q1 higher levels because they were trying to avoid tariffs as well.
Speaker Change: I mean, that's what we have done to with our industrial products is pulled forward. Mike, Michael, I would.
Speaker Change: So press a little bit as what Jim said, and we saw some moderate increases in mobility schedules.
Speaker Change: But I think, you know, they were anticipating what we saw, right? This is pretty heavy.
Sales in February and March [inaudible]
Speaker Change: You know, in obviously significant reduction in inventory, but you know, it wasn't extreme, you know, whole head in regards, and we weren't seeing a lot of significant increases in release
Speaker Change: and right now the run rate is kind of at the normal level a little higher.
Speaker Change: Yeah and I would just add in as well that the fact that we had three or four months across the border of the art industrial area of finance.
Speaker Change: You know, it was a bit of an insurance healthy in case tariffs were enacted but as noted our products because they are USMCA compliant.
Speaker Change: are continuing to shift hair free into the US. So it's sort of irrelevant, the fact that we have to inventory over there is irrelevant.
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Okay, and just looking at
Speaker Change: Linda, you made the comments about looking at what customers might be looking to re-sure. I'm just trying to, does this potentially mean you're looking at M&A in new segments? I'm just trying to understand what might be made overseas, what Linamar makes.
Speaker Change: Could we be looking at you branching into a new type of manufacturing one?
Speaker Change: Yeah, I mean, when I was talking about resharing opportunity, it was about us taking on contracts for cars or sub-assembly that our customers might be buying offshore right now, so that won't require us to acquire anything that won't acquire us.
Speaker Change: require us to, you know, add new product lines. I mean, it's the same kind of stuff that we're making today that maybe they're buying offshore and they want to buy here in North America whether it be casting, forging, machine parts, sub-assemblies.
Speaker Change: There's a good opportunity, as they look to reassure stuff that they might be buying outside of North America. Yeah, I think there's a couple things going on with this, if you take a look at the North American OEMs.
Speaker Change: and what they would traditionally consider low-cost sourcing, which would be Asia, and then also European sourcing. They're looking because they have a couple of years of timeline to get things re-shored here, so that's an opportunity.
Speaker Change: and then also the second side is the customers that are in Europe that are sending parts over.
Speaker Change: and Asia sending parts over. Those are hit today on terrorist. They're looking for onshore. So those, they're looking for supplier that has a U.S. and C.A. compliant flag in the U.S.
Speaker Change: and Mexico to use that as a gateway into the U.S.
Okay.
Speaker Change: and are you able to give some thought about where your dealer inventory levels are across your agriculture product lines?
Speaker Change: I have a sense that those would be, I mean, they're still a little higher, I think they've been coming down Yeah, I guess Michael, the the bigger thing for the dealer network is the amount of inventory that they have overall Not necessarily car inventory, not necessarily the brands of knock-down sulfur and porco [inaudible]
Speaker Change: This is the new tour that we have overall across all of the lines we're sharing.
So, and you know, typically when they have that inventory.
Speaker Change: They have to pay interest, right? Because it's on a foreign land loan payment system.
Okay, and then finally, Linda with the border becoming
Speaker Change: A tool of policy increasingly, do you believe that it is necessary for Linamar to look at putting more capacity in the U.S. surrounding your core products, whether those are industrial or automotive related?
Speaker Change: I mean, Michael, we already have facilities in the U.S. We have sign plans in the U.S.
Speaker Change: So we're obviously going to be looking for opportunities for those facilities.
Speaker Change: We also, of course, have our facilities in Canada and Mexico, which have lots of capability across a wide range of planets as well. So, you know, what we're looking to,
Speaker Change: Define on what plant we're going to put a product in. It's really about some of those fundamentals. Is there capacity somewhere? Where's the capability? Where's the team? Do you know how to run this type of product? Where's the customer plant and what's the closest...
Proximity, which sometimes is…
Our Southern Ontario Plan
So it's really going to be on a...
Planet by Planet, or part by part by
Speaker Change: Program Basin, where we end up putting that work. Obviously, we're going to try and get all of our plants fully full of new work and I think they're...
Speaker Change: Plenty of opportunity to be able to do that. That's our U.S. plan, but also our Canadian and American plans. So, I do not feel the need to shift anything, as Jim has said, nobody's asked us to do that.
Speaker Change: and I think there's great opportunity in fact to grow our business in all three countries.
Speaker Change: I mean, each one of these regions, Mexico, Canada, the US, we have open capacity to take on new work. So we have that ability to offer that multi-country approach that's sort of North America strong.
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Okay, that's it for me. Thank you.
[inaudible] I'm sorry, I'm sorry, I'm sorry, I'm sorry
Speaker Change: Thank you so much also for that question, and for our next question comes from Jonathan Goldman from Skosha Bank.
please go ahead
Hi, good evening team. Thanks for taking my questions.
Speaker Change: Most of them have already been asked, and I do actually appreciate the color you gave on the industrial margins, so that's very helpful. Just one for me on the mobility segment, the outlook for 2025. Now calls for revenue growth.
Speaker Change: Previously, it was flat year-on-year. It looks like industry conditions have gotten incrementally worse. You know, we're seeing production cuts and things can be reflected in the market assumptions you've published.
Speaker Change: What gives you confidence you can see gross this year and how much of the growth you've seen will come from favorable effects?
Thank you. Thank you.
Speaker Change: Yeah, I mean we did we are seeing a little bit stronger sand forecast on the mobility side of the quarter than we did last quarter and it's going to change.
from flat to seeing some growth.
Speaker Change: Part of it is frankly a stronger Q1 than we had in forecasting, but part of it is also, you know, stronger forecasts in subsequent borders as well. Certainly I think part of it is this little stronger polls that we saw in Q1 than we had been expecting, which as...
Speaker Change: Both Jim and Mark have said is actually continuing on into the second quarter. For the programs that we're on, we're seeing our customers pulling the volume.
Speaker Change: Yeah, I think that's what we see today, right? And the other thing that could be playing out here is there could be higher volumes coming from mixed with us having more customers that we deal with having higher volumes and then we would have a higher outlook.
Speaker Change: China has also been another area that we've been seeing some good growth in regards to sales and especially with our customer base.
Speaker Change: Interesting. That's good color. I'll get back to Q. Thanks.
and Jim Jarrell. Thank you.
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Speaker Change: Thank you so much for that question as well, and since there are no further questions at this time, please come to me, Linda.
Okay, thank you so much.
Speaker Change: Well, before I move to my concluding comments, I want to highlight that we are posting an investor's update next week.
for Capital Markets and Institutional Charable Nerds.
Speaker Change: It's an in-person event. It's being held Thursday, May 15th. It's going to start at 9 a.m. here at the in Guelph at the Mark Hasenfrat Center for Excellence.
Speaker Change: In addition to executive management presentations for all interview showcasing the various latest technologies we offer across mobility, access, and A. And we encourage you to prove register, and we can talk about technologies and exciting things.
Speaker Change: and not just Heroes, which is just one little piece of what's going on in the video description.
Speaker Change: Okay, so to wrap up, I'd like to leave you with our team message for the quarter. Overall, I think we delivered a solid quarter with earnings growth and a challenging environment with both segments growing earnings, driving overall earnings growth. Despite software sales, I think our performance has been excellent.
Speaker Change: Secondly, we're very proud of our global teams and their excellent efforts around cost reduction and operational streamlining that is helping to drive our OEMartons back up to the 10% level that we target.
Speaker Change: Third, market share growth in all our businesses is a key element in managing soft markets. It's critical. We're doing it and it's helping the offset, what's happening on the market side. And finally, another quarter, a positive free cash flow means our balance sheet is strong. We've got solid liquidity to position ourselves for further growth opportunities. So, thanks very much everybody, and have a great evening. Thank you very much. Thank you very much.
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Speaker Change: Thank you so much for your attention Linda and this concludes today's call. Thank you for participating. You may now disconnect.